Tesco is the leading retailer in the United Kingdom, and one of the largest food retailers in the world. It is not limited solely to the food market and has expanded into areas such as electrical goods and clothing. Tesco has its headquarters in Hertfordshire and employs about 318,300 people. The group recorded revenues of £42,641 million for February 2007.
Tesco is not just a retailer; it is also a brand. It has to its name, not only various shops such as Tesco Express, Metro, tesco.com, Tesco Extra, Fresh and Easy, Tesco Homeplus but also Tesco station, Tesco insurance, broadband, mobile and electricity. Tesco adapts and answers its customers' needs by improving its offers especially as regards food. Keeping pace with market trends, Tesco has, over the past few years, developed in yet another direction: the organic market. This report therefore will consider the success of Tesco's organic business in United Kingdom.
Tesco is developing a series of strategies based on the organic market. Firstly, it is attempting to widen the scope of organic food available in the store, including fruit and vegetables, meat, spirit and wines. Furthermore Tesco has expanded the ideology of organically grown substances, developing a range of organic clothing in collaboration with Katharine Hamnett. In this report, we are going to focus on the issues surrounding Tesco's organic food range in United Kingdom.
The UK has the third largest market for organic food in Europe, after Germany and Italy, more than 50% of Europe's organic land is in Italy, Germany, Spain and the United Kingdom. By December 2006, 498,646 hectares of land were managed to organic standards across the United Kingdom. Retail sales of organic products in the United Kingdom were worth approximately £1.6 billion during 2005, an increase of 30% on the previous year. Sales of organic products sold through supermarkets increased by 21% in 2006.
As a starting point, it would be useful to consider the environment of the organic market. Indeed, it may help in understanding why environmental influences are particularly significant for the future of a company and its competitors. So, a PESTEL analysis can be done in order to succeed in the new market.
The market has to take into account the environmental protection laws which are very strict and also the fact that local authorities regulate land planning. Furthermore, the market must take into account the European Union regulations, under which the company is obliged to work only with pre-approved product producers.
Equally, supermarkets have to consider factors such as current rates of inflation and the personal disposal incomes of its customers insofar as these factors directly affect its sales. Moreover, the actor on the market must consider the politico-legal variables. For example, the European Commission has proposed that up to 0.9% GM contamination should be allowed in organic food. So this is a market that has many constraints, but demand is strong and growing body of research proving the benefits of organics; it is a growth market.
Tags: Tesco Organic, retail market in UK, WalMart
[...] After analyzing the variables of the macro environment and organic market analysis of Porter; we can identify opportunities and threats of this market. Opportunities Threats Good image, brand of organic Market high competitive product Difficulties of economy of scale Consumers who want to consume high Difficult conditions in the quality organic products international markets Opening on new segments Independent stores Expansion to fair trade Supermarkets in maturity phase Extending organic Tesco in Price war international markets Opportunities Organic products enjoy a positive image among consumers. [...]
[...] The consumer pays great importance to the packaging, which put forward details of the product as well as the history of the producer. Following analysis, Tesco can take advantage of a new market segment to grow in UK, it is prepared organic meals such as salads and others. The English population is slowly turning its attention towards nutritious food in the wake of a general pro-health consciousness. As we noted, Tesco cannot afford to neglect its competitors and must remain vigilant (competitive). Tesco must come up with a plan to counter M&S on [...]
[...] In conclusion, Tesco Organic must innovate and consolidate its position in the UK market to continue as market leader. Moreover, in January 2007, Marks & Spencer introduced the "Plan which is to protect the environment by several actions "committing to change 100 things over five years, because we've only got one world and time is running out Strengths Weaknesses Market leadership M&S plan A Strong brand image Oligopolistic market Functional Structure Good logistics Strengths Market leadership Tesco is the largest retail group in the UK. [...]
[...] The main reasons for buying organic products are health issues taste and the protection of the environment (study prepared by Market Tools Inc in 2006 of 1000 people). Porter's five forces The next step in environment analysis would be to consider the immediate environment of the organization. Take for example, the competitive arena in which Tesco operates. “Firms do not act in isolation; they are influenced by forces that change their markets. Markets are influenced by the actions of firms and markets are influenced by events beyond the control of firms which in turn influenced the actions of firm” (Johnson and Scholes, 2002; Williamson et al., 2004) As we can see in the Porter model, the competitive rivalry is high due to the oligopolistic nature of the market, with competitors such as Marks & Spencer, Waitrose, and Asda. [...]
[...] Regarding organic products, Tesco is currently in partnership with organic producers of the region and further afield. The retailer seeks to reduce its imports of organic products and encourage producers to produce more to reduce the cost of products. "We aim to double the amount of English apples we sell within three years to support British growers and reduce the need for imports." Marketing and sales Tesco proposes for all its fruit and vegetables, the same marketing strategy which allows consumers to quickly locate organic products. [...]
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